Stock Tips & Recommendations Based On fundamental Analysis

The second stock we like is midcap speciality chemical and dye stuff company called Shree Pushkar Chemicals and Fertilisers Ltd. Shree Pushkar Chemicals is largely into dye stuffs and speciality chemicals. It is also into cattle feeds and single super phosphate fertilisers. Last year, the company posted a very strong set of numbers that is for FY17 it posted a top line of Rs 310 crore EBITDA of almost Rs 46 crore and a bottom line of Rs 30 crore. These were quite strong as compared to last year. Our sense is that FY18 also looks a lot better as the company has gone into expansion mode both for its dye stuff and speciality chemical business. For the dye stuff business, it has commissioned a new plant of 3000 tons capacity in the fourth quarter of FY17 and which will make a full impact in FY18 and FY19. It has also commissioned a new Hacid plant in the fourth quarter of FY17 which will actually add to its EBITDA margins. It is also making conscious efforts to increase the presence of cattle feeds and single super phosphate fertilisers by getting into branding initiatives with other players. The company should post earnings of almost Rs 1718 from around Rs 10 for FY17 and with a strong earnings growth of almost 4045% over the next 1218 months a significant amount of rerating can be expected. We have a target price of around 250.

Dewan Housing Finance Ltd (DHFL) is the number one wealth creation idea. Dewan Housing Finance is the fourth largest housing finance company in India. The company is a prominent player in the tier2, tier3 markets and has been growing at a very decent pace both in terms of income and profitability. In fact, in the last four years between FY12 and FY16, loan book growth has been quite impressive at almost 35% odd and our sense is that FY18 looks a lot better with the government pushing affordable housing. In fact, the company’s income composition has also been well diversified with almost 75% of its income coming from the home loan segment, another 1819% coming from the LAP segment while the rest coming in from the SME and the project loan segment. Our sense is that FY18 loan book growth should pan out at around 2023% as per the management and asset quality is likely to remain strong, gross NPA levels had already been around 0.84% last year with almost nil NPAs on the balance sheet level.

Buy companies where we have been recommending and which have corrected recently and the results were very good.

Jamna Auto which is more related to CV. The results showed a lot of improvement in this quarter. The margins went up. ROC of the company is close to 30%. So Jamna Auto falls in that category and baring auto ancillaries, we have seen very good results from metal companies including steel companies.

Jindal Stainless stock saw high of 150 plus. It has corrected to Rs 125­130 levels and the results were very good. There is improvement. The bottomline is also back into black and they are making profits now.

Venky’s stock went to high levels, ran up very fast but it has corrected Rs 150-­200 from its top and the results were very good. The realisations are now touching all ­time high. So this quarter can also be good for them.

These are the stocks where the results were good, correction has happened. One can even take a bet even at these levels.

There is a buy call on Lakshmi Vilas Bank, an old generation private sector bank. We recommend Lakshmi Vilas on account of its sheer valuations. This trades almost two times the book as compared to other players. It is almost double the valuation of stocks like RBL. I believe that if someone is a patient investor with a five year horizon, Lakshmi Vilas can be a real multibagger in times to come.

We recommend a buy of Jindal Steel & Power. The company posted results yesterday. Though there were some one time exceptional gains due to which the stock corrected and there is negative news about the promoter but overall, we are quite hopeful about the entire steel sector. The valuations are compelling for the companies like JSPL. If someone is a longterm player and wants to create a longterm bet, then one should definitely go for JSPL at these levels. This stock can easily double to triple in next three to four years time from these levels.

Our first call is a buy call on Coal India Limited. It is one of the blue chip companies and a Navratna PSU. The reason we recommend Coal India is because we believe that in times to come the way the government has been emphasising upon the operational efficiency of all the PSUs and these Navratna companies and the way things are looking for Coal India especially in the power sector with the government is trying to revive the entire power sector and coal being one of the biggest beneficiaries, things are only going to improve for Coal India from here. Even the Coal India valuations are quite attractive. In terms of risk reward, there is hardly any risk on the downside from these levels. If someone acquires at the Rs 270 levels, there will not be more than 5% downside risk for Coal India. On the contrary, if you talk in terms of the forward looking valuation for this stock, whether you use multiple valuation or you use cash to discounting, the fair price that works out is almost double from these levels. A longterm investor with three to five years horizon can safely opt for Coal India and almost 30% to 40% can be expected in year to year to basis.

You can also look at some of the pharma stocks which we are very very bullish with a slightly longer term view as a contrarian play for a weaker rupee and most of the bad news being priced in. So Dr Reddy, Sun and Lupin are looking very good and as a beneficiary of GST.

People are overlooking the lowest cost for coal which means Coal India. There is 8.5% dividend yield and the whole coal logistics front has been very well sorted out by the government which means that the power producers and the fertiliser companies will have a streamlining of both on the volume and on the price front which is a win win for companies like Coal India and as a midcap, Reliance Power would also be a very big beneficiary of that. We are overweight on both those stocks.

IDFC Bank is a new generation private sector bank and the valuation is quite attractive, trading at almost 1.5 times book value. Hardly any private sector bank is available at these valuations. The entire banking space offers you opportunity and we like it because though on the books, it appears that the NPAs are there but actually they are a part of the demerger process. When this bank was carved out by IDFC, the NPAs came up but they do not have anything more. The way they are using the technology and the way they are launching newer products, they have a long way to go from here and the real story will unfold after two to three years. So if someone is a long­term investor and can wait for two to three years, these are picks one should go for.

One can buy Coal India Ltd. at these levels. There is hardly any downside risk at the price which it trades today. Looking at the future of Coal India, I feel it makes a very valuable buy in terms of valuation. There is hardly any premium between the Coal India and the other peer groups though a clear leader like Coal India should command at least 25% valuations. Overall, the entire PSU sector looks good and the way the government is working on reviving the PSU sector as a whole, Coal India tends to benefit in that as well. Overall, why we like fundamental is because of the valuations and even if you try to do a cash flow discounting base model for Coal India, the fair price for us works out to be around Rs 520 plus which is almost double from these levels. If you are long term investor with a horizon of three to four years, then one should go for Coal India because there is hardly any downside risk and the rewards are definitely high.

Reliance Power is our dark horse which can be re-rated. The results were far ahead of the market. It should be a big beneficiary of the power, 73% prime load factor and so on.

Gujarat Pipavav is at Rs 160. Compared to the valuation you give Adani Port, the fair value is closer to Rs 225, 43% is owned by APM and there was some rumours of them exiting which the company has denied. The global freight, Baltic Freight Index and the global trade is looking robust so that should be an added beneficiary.

Dish TV has borne the brunt because of the Reliance Jio effect. That is misplaced. Their ad revenues, their subscription base, all are showing a healthy growth and we think that could be an outperformer going forward.

We have been regularly very, very bullish on NBCC, EIL and Godrej Property, buy on decline for a 20% upside by the end of the year.

Equitas Holdings numbers will get priced in. We have a buy on this and a longer term rating of Rs 200. Pedigree management, small-midcap banking licence and most of the weakness as far as the last quarter delinquencies already played out. The asset quality could only improve. Given the professional management, this would be one of the better-better stocks which we have in the microfinance which can actually be an outperformer in the next two years.

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